Safeguards Due Diligence Report Project Number: 44321-013 July 2020 Cambodia: Climate Resilient Rice Commercialization Sector Development Program (Revised Due Diligence Report for Establishment of Paddy Drying and Storage Facility and Supply of Equipment for Phou Poy Rice Mill) Prepared by Ministry of Economy and Finance for the Royal Government of Cambodia and the Asian Development Bank. This safeguards due diligence report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. MINISTRY OF ECONOMY AND FINANCE Program Management Office (PMO) Climate Resilient Rice Commercialization Sector Development Program (Rice-SDP) Due Diligence Report on Social Safeguard of Paddy Drying and Storage (PDS) Facility for Phou Poy Rice Mill at Pou Pir Village, Kear Commune, Moung Ruessei District, Battambang Province 1 | P a g e MINISTRY OF ECONOMY AND FINANCE Program Management Office (PMO) Climate Resilient Rice Commercialization Sector Development Program (Rice-SDP) Due Diligence Report on Social Safeguard of Paddy Drying and Storage (PDS) Facility for Phou Poy Rice Mill ___________________________________________________________________ I. Introduction 1. This due diligence report (DDR) on social safeguards of paddy drying, and storage (PDS) Facility for Phou Poy Rice Mill is a new report to replace the existing DDR approved by ADB on 6 December 2019. The existing DDR was prepared for the PDS Facility proposed to be constructed within Phou Poy Rice Mill, located at Chumnik Village, Anlong Vil Commune, Sangkae District, Battambang Province. However, before the actual construction of the Facility can start at the proposed site, the villagers utilizing the project level grievance redress mechanism complaint to the commune councils on possible dust nuisance from expansion of the Rice Miller’s existing rice mill business facilities. The commune council informed the Rice Miller about the complaint and requested the Miller to relocate the PDS Facility. The Rice Miller agreed to the request of the villagers and commune council and submitted a request letter to the Program Management Office (PMO) requesting relocation of the proposed PDS Facility to another site owned by the Miller, located at Pou Pir Village, Kear Commune, Moung Ruessei District, Battambang Province. The new site is about 35km from the earlier proposed site. Upon receiving the request, the PMO conducted a meeting with the Rice Miller where the Miller informed that the villagers and local authorities at the new location welcome the establishment of the PDS Facility and that the Miller would get more business and marketing opportunities at the new location. The PMO agreed to the Rice Miller’s request and initiated review of the design of the Facility and prepared safeguard documents (IEE & DDR) for the new location. The DD & CS firm has confirmed that there will not be any changes to the design of the Facility. The request letter of the Rice Miller for relocation of proposed PDS Facility and complaint letter from villagers are attached as annex VI. II. Summary of Public Consultation 2. The Royal Government of Cambodia (RGC) has received loans and grants financing from the Asian Development Bank (ADB) and other sources towards the cost of the Climate-Resilient Rice Commercialization Sector Development Program ("Rice-SDP"). The Rice-SDP supports the implementation of the ‘Policy on the Promotion of Paddy production and Rice Export’ of the RGC. It is designed to help transform the predominantly subsistence rice sector into a commercially oriented one by improving household and national food security and expanding rice export through (i) removing the legal and regulatory constraints inhibiting rice commercialization; (ii) improving productivity of paddy crops and consistency in quality of milled rice; (iii) enhancing rice 2 | P a g e value chain support services; and (iv) addressing risks of climate change through mitigation and adaptation. The Rice-SDP is operating in three provinces which have high levels of rice production, namely Battambang, Kampong Thom and Prey Veng Provinces. 3. During the design of the Rice-SDP, the inadequate capacities of the post-harvest infrastructure to handle the increasing volumes of wet paddy were identified as a serious constraint. The infrastructure to handle, dry and store, and transport the volumes of wet paddy is not sufficiently developed despite significant private investment in drying, storage and milling facilities in recent years. Establishment of PDS facilities are therefore one of the key activities under the Rice-SDP to help accommodate paddy supplies at peak periods after harvest to ensure better quality for processing and retained added value in Cambodia. 4. The Ministry of Economy and Finance (MEF) is the Executing Agency (EA) of the Rice- SDP and has established a Program Management Office (PMO). The PMO has established a PDS Selection Committee in cooperation with the Ministry of Agriculture, Forestry and Fisheries/National Implementation Office (MAFF/NIO) and the three Provincial Implementation Offices (PIOs) who will participate in the entire PDS procurement process. 5. The Rice Millers eligible to avail the concessional loans from Rice-SDP to establish the PDS Facilities are selected following a cumbersome process. Upon receipt of the expression of interest (EOIs) from the Rice Millers, the PMO conducted a feasibility study through engaging an independent firm, assessed the Rice Millers’ PDS business proposals, and came up with a Final Ranking of the Rice Millers before employing a DD & CS (detailed design and construction supervision) firm to support the Rice Millers. The final ranking of the Rice Millers was endorsed by the PDS Selection Committee. The Phou Poy Rice Mill is ranked first in Battambang province and therefore got selected to avail the concessional loan for establishment of PDS Facility. 6. A revised IEE for the proposed PDS Facility for Phou Poy Rice Mill at the new location, Pou Pir Village, Kear Commune, Moung Ruessei District, Battambang Province, has been prepared covering all facets of environmental safeguards including policy principles, subproject scope, context and environment (physical, biological and socio-economic resources), anticipated environmental impacts and mitigation measures, analysis of alternatives, information disclosure, consultation and participation, grievance redress mechanism (GRM), a rapid environmental assessment, an environmental management plan (EMP), an environmental monitoring plan, institutional arrangement and responsibilities, etc. A brief description of the subproject area including socio-economic characteristics is described under para 7 & 8 below. 7. Battambang is long renown for quality rice, fruit and vegetable production. Farming is the main source of income for the majority of households in the subproject area, while other income is obtained from off-farm employment in construction, other industries, government employment, and trading. A minority of rural households derive income from fishing, though this activity is merely a supplementary activity for part of the year. Rice production is the mainstay of the rural economy in most areas. The total paddy production in Battambang province was about 836,925 tons out of which wet season production was 796,059 tons and that of the dry season was 40,866 3 | P a g e tons. 30% rice crop production in Battambang province depended on natural irrigation and irrigation, and 70% depended on rain water. Rice crop production has changed from traditional farming to mechanized farming through the use of modern agricultural equipment, rice seed, chemical fertilizer and pesticide, even though the increase in seasonal rice crop production is limited due to absence of irrigation facility (Source: Battambang Development Plan 2016-2018). 8. Many rural families do not have regular cash incomes, either because of access constraints, lack of landholdings and shortage of employment opportunities. Many families are dependent on remittances by family members working away from home, most often in the construction and garment industries and/or as overseas migrant workers. Alleviating poverty became RGC’s highest priority according to its Millennium Development Goals in 2008. Thereafter, sustained efforts by RGC led to the decrease in poverty rate from 47.8% in 2007 to 13.5% in 2014. But the rural poverty incidence where 90% of the poor live fell from 24.6% in 2009 to 20% in 2012. Based on the Battambang Development Plan, the poverty level in Moung Ruessei district of Battambang province where the proposed PDS Facility is located has reduced from 28.52% in 2010 to 22.10% in 2017 (Source: Battambang Provincial Department of Planning, 2018). The proposed PDS Facility is expected to significantly contribute to a qualitative improvement in the villagers living standards as they will get opportunity to expand their rice business as the Rice Miller will buy more paddy from them than earlier times, farmers will be able to save on transportation cost as they do not have to transport the paddy very far, and also they can work as labor at the